Auctus Advisors analyst Stephane Foucaud reiterated his US$10 per share target price on Vaalco Energy Inc. (EGY:NYSE) in a research note dated March 14, 2024.
Foucaud notes increasing revenues, more potential upside in Gabon, and imminent EG potential as major reasons for this decision.
The report noted that Vaalco's year-end 2023 (YE23) cash position of US$121 million and fiscal year 2023 (FY23) working interest (WI) production of 23,946 boe/d were in line with previous indications. The company's FY24 capex budget was US$70-90 million, lower than the analyst's forecast of US$138 million.
Vaalco is expected to produce 20.8-23.4 mboe/d in 2024, excluding Cote d'Ivoire, with Canada being the only asset expected to deliver growth in 2024 under the firm capex budget program.
Four Sources of Upside in 2024
Foucaud highlighted four potential sources of upside that could be unlocked in 2024:
- The negotiation phase for the EG asset is complete, and now the company is sitting tight for confirmatory documents to start the FEED ahead of sanctioning the development of 18.5 mmboe WI 2P reserves;
- Vaalco is also expected to take FID on the development of 8-12 mmboe 2C resources at the Ebouri field in Gabon;
- the analysts wrote they anticipate growing visibility on the Svenska acquisition was expected in the second quarter of this year, which could add ~4.5 mboe/d WI production and 2P reserves;
- (4) an exploration well is also expected to be drilled in Canada in 2024, which could also add reserves.
Recent Business Developments
Foucaud reported that Vaalco had 77.3 mmboe WI 2P reserves at YE23, which included 15.8 mmbbl in Gabon, 24.5 mmbbl in Egypt, 18.6 mmboe in Canada, and 18.5 mmboe in EG, representing a 1% increase compared to YE23.
The company had more than replaced its FY23 production, given the strong performance of the producing assets in 2023.
"Vaalco could sanction a further US$18 mm capex program in Egypt in 2H24 (+15 wells) dependent on the results of the 1H24 program. This could boost production beyond the FY24 guidance," Foucaud wrote.
Valuation
"Our FY24 and FY25 production forecasts of respectively 21.7 mboe/d and 25.3 mboe/d exclude the optional 2H24 programme in Egypt and the Ebouri field development," Foucaud stated.
With all of this, Foucaud gave Vaalco a US$10 target price, which is a 92.31% increase from its price at the time of the report of US$5.20.
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Disclosures for Auctus Advisors, Vaalco Energy Inc., March 14, 2024
VAALCO Energy plc (“VAALCO” or the “Company”) is a corporate client of Auctus Advisors LLP (“Auctus”). Auctus receives, and has received in the past 12 months, compensation for providing corporate broking and/or investment banking services to the Company, including the publication and dissemination of marketing material from time to time.
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